UC-NRLF 


9 


THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

HENRY  RAND  HATFIELD 
MEMORIAL  COLLECTION 


PRESENTED  BY 

FRIENDS  IN  THE  ACCOUNTING 

PROFESSION 


W  TO  UNDERSTAND 
A  BALANCE  SHEET  . 


^^y    -r  c#wf>4~*4^ 


-FT 


HOW 
TO  UNDERSTAND 
A  BALANCE  SHEET 


CYRUS  PEIRCE  ^COMPANY 


We  make  grateful  acknowledgment 

to  the 

New  York  Times  Annalist 

for  much  of  the  data  from  which 

this  book  is  compiled 


H^    ****** 


HOW  TO  UNDERSTAND  A  BALANCE  SHEET 


M521575 


It  will  be  apparent  to  the  reader  that  the 
method  of  analysis  explained  in  this  book- 
let applies  only  to  industrial  companies. 


Fourth  Edition 


Copyright  1921,  Cyrus  Pelrce   YCompmr 


HOW  TO  UNDERSTAND  A  BALANCE  SHEET 


HE  ability  to  read  a  balance 
sheet  and  from  it  understand 
the  exact  financial  condition 
of  any  company,  is  an  impor- 
tant  aid  to  an  investor. 
<I  When  an  Investment  Bank- 
ing House  is  offered  the  bonds, 
notes  or  securities  of  a  cor- 
poration, the  first  and  most 
important  step  is  to  examine  its  balance  sheet. 

The  Investment  Banking  House  employs  the 
most  capable  public  accountants  available  to  pre- 
pare and  certify  the  corporations  balance  sheet, 
because  an  accurate  balance  sheet  is  an  exact  register 
of  the  organization's  financial  health. 

We  have  found,  in  explaining  the  merits  of  secu- 
rities, that  many  investors  have  not  had  special 
training  which  enables  them  to  form  an  independ- 
ent judgment  of  a  company's  financial  condition  by 
an  inspection  of  the  balance  sheet. 

Believing  that  a  simple  explanation  of  how  to 
read  a  balance  sheet  will  be  of  value  to  many  of  our 
clients,  we  are  reproducing  herewith  four  actual 
balance  sheets  of  well  known  companies  which 
will  serve  as  examples  for  the  discussion. 


Cyrus  Peirct  fc?  Company 


It  will  be  observed  that  the  amounts  listed  under 
the  column  entitled  "Desirable  limits"  are  not  the 
same  in  the  four  examples  nor  are  the  comments 
attached.  In  the  first  place,  it  must  be  kept  in  mind 
that  the  limits  fixed  for  the  four  examples  depend 
to  some  extent  upon  the  dates  of  the  balance  sheet, 
for  relations  among  the  various  factors  have  seasonal 
variations.  Again,  among  any  groups  of  factors,  a 
relation  which  might  be  desirable  for  one  class  of 
industry  would  be  highly  unsuitable  for  another. 
No  hard  and  fast  rule  may  be  laid  down,  and  in 
individual  instances  experience  must  be  the  guide, 
but  it  is  believed  that  even  under  such  conditions, 
the  method  here  presented  will  give  any  one  a  bet- 
ter understanding  of  the  average  balance  sheet. 


ANALYSIS  KEY 

I 

Ratio  of  Current  Assets 

to  Current  Liabilities 

=  Degree  of  liquidity. 

2 

Ratio  of  Reserves 

to  Total  Assets 

=  Degree  of  conservatism. 

3 

Ratio  of  Cash 

to  Current  Liabilities 

=  Cash  position. 

4 

Ratio  of  Fixed  Assets 

to  Net  Worth 

=  Apportionment  of  Stockhold- 
ers' interest. 

5 

Ratio  of  Receivables 

to  Sales 

=  Collection  policy. 

6 

Ratio  of  Merchandise 

to  Sales 

=  Size  of  inventory. 

7 

Ratio  of  Sales 

to  Net  Worth 

=  Activity  of  Stockholders'  invest- 
ment. 

8 

Ratio  of  Debt 

to  Net  Worth 

=  Relation  between  money-inter- 
est of  Creditors  and  that  of 
Stockholders. 

9 

Ratio  of  Sales 

to  Fixed  Assets 

=  Vitality  of  Fixed  Assets. 

IO 

Ratio  of  Profits  or  Deficit 

to  Capitalization 

=  Degree  of  profitableness  of  bus- 
iness. 

EXAMPLE  NUMBER  ONE 

LARGE  AUTO  ACCESSORY  CO'  BALANCE  SHEET 

OCTOBER  31,  I92O 

ANALYSIS 

Aftual 
Condi- 
tion 

De- 
sirable 

Limits 

COMMENT 

Current  Assets        =    $65,895,193! 
Current  Liabilities  =       49,806,494/ 

*32% 

200% 

This  signifies  that  there  is  but  $1.32  of 
Current  Assets  for  every  $1 .00  of  Current 
Liabilities. There  should  be  at  least  $2.00 
of  Current  Assets  for  every  $1 .00  of  Cur- 
rent Liabilities. 

2     Reserves                 =         1,716,575! 
Total  Assets           =     169,012,832/" 

*% 

3% 

This  indicates  that  there  is  only  ic.  of 
Reserves  for  every  $1.00  of  Total  Assets. 
Conservatism  would  demand  at  least  3c. 
of  Reserves  for  every  $1.00  of  Total  As- 
sets. 

O     Cash                       =         2,178,509! 
Current  Liabilities  =      49,806,494/  ~ 

4% 

25% 

This  denotes  there  is  4c. of  Cash  on  hand 
for  every  $1.00  of  Current  Liabilities. 
This  is  a  very  weak  cash  position.  There 
should  be  at  least  15c.  of  Cash  on  hand 
for  every  Ji.ooof  Current  Liabilities. 

A     Fixed  Assets           =     103,117,639! 
T    Net  Worth            =     111,597,519/" 

92% 

5o% 

This  shows  that  there  is  92c.  of  Fixed 
Assets  for  every  £1 .00  of  Net  Worth. 

Receivables            =       12,519,035! 
Sales                        =     188,866,024/" 

6% 

'°% 

This  registers'that  the  Receivables  on 
hand  amount  to 6c. per$i. 00 of Sales,and 
also  that  the  Receivables  equal  22  days' 
business.  Both  of  these  elements  indicate 
a  good  state  of  collectivity .  There  should 
never  be  more  than  10c.  of  Receivables 
for  every  $1.00  of  Sales. 

6 

Merchandise          =       51,197,649! 
Sales                       =     188,866,024] 

2  7% 

30% 

This  indicates  27c.  of  Merchandise  on 
hand  for  every  $1 .00  of  Sales;  Merchan- 
dise equals  about  90  days  of  business,and 
a  merchandise  turnover  of  about  4  times 
per  annum.   This  is  normal  showing. 
Merchandise  should  not  run  over  30c. 
per  $1.00  of  Sales. 

7     Sales                        =     188,866,024! 
Net  Worth             =     111,597,519/ 

169% 

200% 

This  reflects  there  was  #1.69  of  Sales  for 
every  $1.00  of  Net  Worth.  This  is  very 
sluggish.  There  should  be  at  least  £1.00 
of  Sales  per  $1.00  of  Net  Worth  (Stock- 
holders'interest). 

0    Debt                       =      55,698,000! 
Net  Worth             =    111,597,519/ 

49% 

30% 

This  points  to  there  being  49c.  of  Debt 
for  every  $1 .00  of  Net  Worth  (Stockhold- 
ers' investment).   There  should  not  be 
more  than  30c.  of  debt  for  every  £1.00  of 
Net  Worth. 

9    Sales                      =    188,866,024! 
Fixed  Assets           =    103,117,639/ 

182% 

300% 

Signifies  there  was$i.82of  Sales  for  every 
$1  .ooFixed  Assets.  Thisi  s  much  toosmali; 
there  should  be  at  least  $3  of  Sales  for  ev- 
ery $1  Fixed  Assets.  Volume  of  Sales  does 
not  make  Plant  investment  worth  while. 

1 0  Deficit                    =        2,046,731 !  _ 
Capitalization         =    132,050,000/"" 

»#% 

'5% 

The  operations  of  Company  were  con- 
ducted at  a  loss  equal  to  i^c.  on  every 
$1.00  of  Capitalization.  Normal  profits 
should  have  been  at  least  Ijc.  on  each 
$1. 00  of  Capitalization. 

SUMMARY 


The  above  analysis  discloses  the  following 
danger  points: 

A  poor  business  balance. 

Lack  of  conservative  reserves. 

Poor  cash  position. 

Too  heavy  investment  in  plant. 

Subnormal  activity  of  invested  funds. 

Bad  balance  between  capital  invested 
and  capital  secured  by  loans. 
[9]  This,  together  with  No.  4,  shows  that 
plant  has  been  enlarged  more  rapidly  than 
net  worth  (stockholders'  interest),  and  also 


that  sales  activity  is  not  keeping  pace  with 

the  increase  in  size  of  plant. 

[10]  Business  operated  at  a  loss  instead  of  a 

profit. 

The  following  are  normal  points: 

5]  Efficient  colleftion  policy. 

6    Turnover  ofmerchandise  is  aftive  enough 
and  is  proportionate. 

The  above  analysis  shows  a  precarious  finan- 
cial condition;  there  is  need  for  immediate 
intelligent  correction  if  this  company  is  to  be 
saved  from  reorganization  or  worse. 


Cyrus  Peirce  £s?  Comfany 


EXAMPLE  NUMBER  TWO 

LARGE  AND  WELL' KNOWN  REFRIGERATOR  CO  ' 

BALANCE  SHEET  AUG.  0, 1,  I92O 

ANALYSIS 

Aaual 
Condi- 
tion 

De- 
tirable 
Li  mitt 

COMMENT 

I     Current  Assets       =       $1,077,187! 
Current  Liabilities  =           606,430/  — 

178% 

3°0% 

Indicates  there  is  $1.78  ofCurrent  Assets 
for  every  $1.00  of  Current  Liabilities. 
There  should  be  at  least  $3  .00  of  Current 
Assets  for  every  $1.00  of  Current  Liabil- 
ities. 

2    Reserves              = ! 

This  shows  a  glaring  unprotected  Re- 
serve condition, and  is  a  strongindication 
ofinferior  financial  ability. There  should 
be  at  least  5c.  of  Reserves  for  every  $1.00 
of  Total  Assets. 

Total  Assets           ==         2,395,036/ — 

3    £ash      t.um..    =            45,7371  = 
Current  Liabilities  =            606,430/ 

7% 

25% 

Evidences  there  is  7c.  of  Cash  for  every 
Ji.ooof  Current  Liabilities.  This  is  poor 
showing  of  Cash  status.  There  should  be 
at  least  25c.  of  Cash  for  every  J1.00  of 
Current  Liabilities. 

a     Fixed  Assets            m         1,317,849! 
Net  Worth            =         1,170,436/ 

"3% 

60% 

Signifies  there  is  fl.13  of  Fixed  Assets 
per$i  00  of  Net  Worth. 

J     Receivables            =            244,260! 
Sales                       =         1,488,538/ 

16% 

20% 

Reflects  there  is  16c.  of  Receivables  on 
hand  for  every  $1 .00  of  Sales;  same  equals 
about  60  days  of  business.  This  is  a  nor- 
mal collection  showing.  There  should 
not  be  more  than  20c.  of  Receivables  per 
$1.00  of  Sales. 

6' 

Merchandise          =            787,190! 
Sales                        -         1,488,538/" 

5*% 

40% 

This  shows  that  there  is  52c.ofMerchan- 
dise  for  every  fi.aoof  Sales;  tame  equals 
189  days  of  business,  and  a  merchandise 
turnover  of  about  2  times  per  annum. 
This  it  too  large  an  inventory  ttatut. 
There  should  not  be  more  than  40c.  of 
Merchandise  for  every  $1 .00  of  sales. 

7     Sales                        =         1,488,538! 
Net  Worth            =         1,170,436/ 

127% 

300% 

Denotes  therewas^l.27ofSales  for  every 
$1 .00  of  Net  Worth  (Stockholders'  inter- 
est).  This  is  a  striking  case  of'dry  rot," 
and  a  very  overextended  condition. 
There  should  be  at  least  £3.00  of  Sales 
for  every  J1.00  of  Net  Worth. 

O 

°    Debt                      -         1,224,600! 
Net  Worth            =         1,170,436/ 

io4% 

30% 

Registers  there  it  fl  .04  of  Debt  for  every 

Si.  00  of  Net  Worth  (Stockholders  'in  vest- 
ment). This  meant  that  the  Creditor! 
have  a  greater  interett  by  4c.  than  the 
legal  owners.  There  should  not  be  over 
30c.  of  Debt  to  every  Si  .00  ofNet  Worth. 

Q 

Sales                        m         1,488,538! 
Fixed  Assets          =         1,317,849/ 

"3% 

400% 

Indicates  there  was  £1.1  j  of  Sales  for  ev- 
ery fl  .00 of  Fixed  Assets.  This  is  much 
too  small.  There  should  be  at  least  $4.00 
of  Sales  for  every  $1 .00  of  Fixed  Assets. 
Viewed  with  No.  4,  it  shows  that  sales 
productivity  doet  not  warrant  size  of 
plant. 

I  O  Profit                     =            135,509! 
Capitalization        =         1,788,000/ " 

8% 

'5% 

Shows  that  only  8c.  per  fl  .00  of  Capital- 
ization was  earned  for  the  year.  This 
should  have  amounted  to  at  least  15c.  per 
Si  .00  of  Capitalization . 

SUMMARY 


Above  analysis  shows  these  danger  points: 
1]  Poor  liquidity  status. 

2  Absence  of  reserves. 

3  Weak  cash  position. 

4  A  too  heavy  investment  in  fixed  assets 
compared  with  amount  of  stockholders'  in- 
vestment. 

[6]  Merchandise  on  hand  is  abnormal,  and 
turnover  of  same  is  too  small. 

7]  Vitality  of  money  investment  is  sluggish. 

8  Funds  controlled  by  creditors  are  greater 
than  money  investment  of  stockholders. 


[9]  Sales  activity  does  not  warrant  plant  in- 
vestment, and,  considered  with  No.  4,  points 
to  an  overextended  status. 
[10]  Profits  are  much  below  a  profitable 
return. 

The  following  is  the  normal  point: 
[5]  Good  collection  policy. 
This  business  is  not  far  from  so-called 
"financial  rocks."  It  has  all  the  "ear-marks" 
of  incompetent,  old-fashioned  management. 
Here  is  an  example  of  a  company  that  would 
be  practically  impossible  to  rejuvenate. 


EXAMPLE  NUMBER  THREE 

OLD  AND  WELL-ESTABLISHED  MAIL  ORDER  HOUSE 
BALANCE  SHEET  DEC.  J  I,  I92O 

ANALYSIS 

Actual 
Condi- 
tion 

De- 
sirable 
Limits 

COMMENT 

A     Current  Assets       =$163,531,811! 
Current  Liabilities  =    73,180,074] 

223% 

250% 

Signifies  there  is  $2.23  of  Current  Assets 
for  every  $1.00  of  Current  Liabilities. 
There  should  be  at  least  $2.50  of  Current 
Assets  for  every  $1 .00  of  Current  Liabili- 
ties in  view  of  quality  of  Current  Assets 
and  character  of  clientele. 

2     Reserves                 =      3,423,749] 
Total  Assets           =230,668,197] 

1% 

3% 

Indicates  there  is  ic.  of  Reserves  for  each 
$1 .00  of  Total  Assets.  There  should  be  at 
least  jc.  of  Reserves  for  each $1. 00  ofTo- 
tal  Assets  for  a  sound  showing. 

3    Cash                     =      3»263»353l  = 
Current  Liabilities  =    73,180,074] 

4% 

25% 

Points  to  Cash  of  4c.  for  every  $1.00  of 
Current  Liabilities.  This  is  very  weak 
Cash  condition.  There  should  be  at  least 
25c.  of  Cash  for  every  $1.00  ofCurrent 
Liabilities. 

a     Fixed  Assets           =    67,136,385! 
Net  Worth            =    90,554,374] 

74% 

60% 

Registers  that  there  is  74c.  of  Fixed  As- 
sets for  every  $1 .00  of  Net  Worth. 

5     Receivables            =    47,797,134! 
Sales                        =233,856,872] 

20% 

3o% 

This  means  that  there  are  20c.  ofReceiv- 
ableson  hand  for  everyji .00 ofSales, Re- 
ceivables amounting  to72days'business. 
There  should  not  be  more  than  joe.  of 
Receivables  for  every  $1.00  of  Sales  in 
this  class  of  business. 

6 

Merchandise          =105,071,243! 
Sales                        =  233,856,872] 

45% 

25% 

This  points  to  there  being  45c.  of  Mer- 
chandise on  hand  for  every$i.ooofSales; 
it  equals  162  days  of  business,  and  an  an- 
nual turnover  of  a  little  more  than  two 
times.  This  is  too  heavy  an  Inventory. 
There  should  not  be  more  than  25c.  of 
Merchandise  for  every  Jt.oo  of  Sales, 
which  would  equal  90 days'business,and 
a  turnover  per  year  of  about  four  times. 

7    Sales                        =233,856,872! 
Net  Worth            =    90,554,374] 

258% 

3°o% 

Reflects  there  was$2. 58  ofSales  for  every 
Jl.ooof  Net  Worth  (Stockholders'  inter- 
est) .  To  show  a  healthy  status  in  this  re- 
gard there  should  be  at  least  $3.00  of 
Sales  to  every  $1 .00  of  Net  Worth. 

8 

Debt                       =110,103,823! 
Net  Worth             =    90,554,374] 

122% 

60% 

This  points  to  a  debt  of  £1.22  for  every 
$1 .00  of  Net  Worth(Stockholders'  invest- 
ment). This  is  a  strong  point  of  inferior 
financial  management,  showing  that  the 
creditors  have  a  greater  interest  in  the 
business  by  22c.  than  the  legal  owners. 
There  should  not  be  over  6oc.ofDebt  for 
every  Jt.ooof  Net  Worth. 

9    Sales                        =233,856,872! 
FixedAssets           =    67, 1 36,385  J 

348% 

4°o% 

This  indicates  that  volume  ofSales 
amounted  to$3.48per$i.ooof  Fixed  As- 
sets. It  means  that  amount  of  capital  in- 
vested in  Fixed  Assets  is  not  warranted 
by  volume  ofSales.  Sales  should  at  least 
equal$4.ooforevery$i.ooofFixedAssets. 

I  O  Profit                      —    11,746,670! 
Capitalization         =  I  5  4 ,  064 , 3  7  3  ]  ~~ 

7% 

i5% 

Operations  of  company  were  conducted 
at  a  profit  of  but  7c.  for  every  $1.00  of 
Capitalization.  Normal  showing  would 
call  for  a  yield  of  at  least  lye.  of  Profit 
for  every  $1.00  of  Capitalization. 

SUMMARY 


Above  analysis  shows  these  danger  points: 
[1]  Poor  liquidity  balance. 
[2  j  Unprotected  reserve  position. 
[3]  Dangerous  cash  showing. 
[4]  Too  great  investment  in  fixed  assets  for 
total  stockholders'  investment. 
[6]  Too  heavy  inventory  showing. 
£7]  Vitality  of  unit  of  money  investment  is 
too  small. 

£8]  Striking  example  of  a  poor  balance  be- 
tween money  supplied  business  by  stock- 
holders and  that  by  creditors. 


[9]  Sales  do  not  warrant  plant  investment, 
and,  considered  with  No.  4,  show  that  the 
organization  is  overextended. 
[10]  Profits  are  one-half  the  minimum  re- 
turn that  would  reflect  a  healthy  return. 

The  following  is  the  normal  point: 
[5]  A  good  collectivity  showing. 

The  above  analysis  shows  that  the  manage- 
ment will  have  a  number  of  difficult  prob- 
lems on  its  hands  in  bringing  this  business 
back  into  proper  balance. 


Cyrus  Peirce  tjf  Comfany 


!ELOW  is  reproduced  the  balance  sheet  of 
a  well-known  tradtor  company.  Because 
it  reflects  a  strong  position  in  view  of  re- 
cent trade  conditions,  it  will  be  used  as  Example 
Number  Four.  On  the  opposite  page  we  have  ana- 
lysed this  Balance  Sheet,  believing  that  the  method 
will  be  apparent  and  will  aid  the  reader  in  making 
an  independent  analysis  of  other  balance  sheets. 


ACTUAL  BALANCE  SHEET  OF 

WELL-KNOWN  TRACTOR  COMPANY 

AS  OF  MARCH  3 1,  I92I 

/ 

ASSETS 

Cash  in  Banks  and  On  Hand $    209,281.40 

Inventory 1,648,624.90 

Notes  and  Accounts  Receivable 237,398.16     $2,095,304.46 

Patents 1.00 

Land  Buildings  and  Equipment $    901,761.43 

Less:  Reserve  for  Depreciation 189,587.00     $    712,174.43 

Claim  for  Refund  of  Overpayment  to  U.  S. 

Government  1 9 1 7  Federal  Income  Taxes      .      .  28,200.01 

Deferred  Charges 25,001.48 

Total  Assets $2,860,681.38 

LIABILITIES 

Notes  Payable $    225,900.00 

Accounts  Payable 105,412.92     $    331,312.92 

Debenture  Serial  Notes 450,000.00 

Reserve  for  Workmen's  Compensation    .      .      .  20,000.00 

Capital  Stock: 

Preferred  7%  Cumulative       .      .  $1,250,000.00 

Common 500,000.00     $1,750,000.00 

Surplus,  Subjeft  to  Provision  for 

Federal  Income  and  Profit  Taxes  .  309,368.46     $2,059,368.46 

Total  Liabilities $2,860,681.38 


EXAMPLE  NUMBER  FOUR 

BALANCE  SHEET  OF  WELL'KNOWN  TRACTOR  COMPANY 
MARCH  31,  I92I 

ANALYSIS 

Adtual 
Condi- 
tion 

De- 
sirable 
Limits 

COMMENT 

Current  Assets       =$2,095,304.46! 
Current  Liabilities  =       331,312.92] — 

630% 

200% 

This  shows  $6.30  of  Current  Assets  for 
every  $1.00  of  Current  Liabilities  as 
against  a  normal  requirement  of  $2.00, 
a  very  satisfactory  position. 

2 

*     Reserves                 =       189,587.00!  _ 

Total  Assets           =    3,050,268.3s/- 

6.22% 

3% 

Indicates  there  is  6.22  Cents  of  Reserves 
for  each  #1 .00  of  Total  Assets,  which  is 
ultra  conservative  and  over  twice  the 
amount  necessary  in  the  normal  course 
of  events. 

J     Cash                        =       209,281.40! 
Current  Liabilities  =       331,312.92/  — 

63% 

25% 

Points  to  Cash  of  63c.  for  each  £1.00  of 
Current  Liabilities.  This  reflects  a  very 
strong  Cash  position,  as  25c.  for  each 
£1 .00  of  Current  Liabilities  is  ordinarily 
a  safe  margin. 

a     Fixed  Assets          =       901,761.43! 
^*    Net  Worth            =    2,059,368.46  J 

43-8% 

5°% 

Signifies  that  there  is  43.8c.  of  Fixed  As- 
sets for  every  $1. 00  of  Net  Worth. 

5     Receivables            =       237,398.16] 
Sales*                      =    2,835,646.82] 

8^% 

•°% 

This  means  that  there  is  8J^c.  of  Receiv- 
ables on  hand  for  every  £1 .00  of  Sales. 
Receivables  amount  to  about  30  days' 
business.  A  10%  limit  is  satisfactory  in 
this  class  of  business. 

6     Merchandise          =    1,648,624.90! 
Sales*                      =    2,835,646.82] 

58% 

40% 

This  reflects  too  heavy  an  inventory.  In 
this  business  an  inventory  of40%  of  Sales 
is  considered  normal. 

7    Sales*                      =    2,835,646.82! 
Net  Worth            =    2,059,368.46/ 

137-7% 

200% 

This  shows  there  was  $l.377/io  of  Sales  for 
every  fl.  00  of  Net  Worth  (Stockholders' 
interest).  Normally  this  figure  should  be 
#2.00  or  more  to  each^i.ooofNet  Worth. 

O 

Debt                       =       801,312.92! 
Net  Worth            =    2,059,368.46] 

39% 

5°% 

Registers  there  is  39c.  of  Debt  for  every 
$1.00  of  Net  Worth  (Stockholders'  In- 
vestment) which  is  about  the  normal  ra- 
tio for  a  company  of  this  kind. 

9    Sales*                      =    2,835,646.82! 
Fixed  Assets           m       90 1 ,761 .43  ] 

3*4% 

4°°% 

This  indicates  that  volume  of  Sales 
amounted  to$3. 14  per§l.ooof  Fixed  As- 
sets. This  means  that  this  Company's 
plant  was  not  turning  out  tractors  up  to 
its  normal  capacity. 

IO  Profit*                    =       111,916.99! 
Capitalization         =    1,750,000.00/ 

6-4% 

15% 

Shows  that  operations  of  Company  pro- 
duced 6.4  Cents  per  $1 .00  of  Capitaliza- 
tion. Normal  showing  would  call  for  a 
yield  of  at  least  ice.  of  profit  for  every 
$1 .00  of  Capitalization. 

•These  figures  are  not  obtained  from  the  balance  sheet  but  are  taken  from  the  Company's  earning  statement. 

SUMMARY 


Above  analysis  shows: 
[1]  Extraordinary  Current  position. 
[2}  Adequate  reserves. 
[3]  Strong  Cash  position. 
£4}  Normal  investment  in  plant. 
[5]  Strong  Colleftivity  showing. 
£6]  Too  heavy  inventory  showing. 
[7]  Aftivity  of  invested  funds  about  one- 
third  under  normal. 


[8}  Shows  money  properly  supplied  by 

Stockholders  instead  of  by  Creditors. 

[9]  Points  to  Sales  activity  not  up  to  Plant 

capacity. 

[io]  Profits  are  sub-normal. 

Above  Analysis  shows  that  this  Company's 

condition  is  sound,  and  with  increased  sales 

efforts  it  should  show  normal  profit  for  the 

year.  This  is  a  remarkable  balance  sheet  in 

view  of  present  conditions. 


Cyrus  Peirce  &f  Comfany 


The  Symbol  of 
Cyrus  ^eirce  &  Company 


Cyrus  Peirce  6?  Company 

-^{INVESTMENT  SECURITIES}*- 


14  DAY  USE 

"ToANTSPr- 


LD  21-l00m-6,'56 
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.General  Library 
University  of  California 
Berkeley     . 


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6AYLORD  BROS.  Inc. , 

Syracuse,  N.  Y. 

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